Question:
The firm is a price taker because
The firm is a price taker because
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This long-run curve is named for its role in guiding a firm's capacity decisions.
Updated On: Jul 7, 2026
- its ATC curve is U-shaped.
- MC and ATC are equal at the profit-maximizing output
- its MR curve is horizontal.
- its MC curve slopes upward.
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The Correct Option is C
Solution and Explanation
A firm in a perfectly competitive market is called a "price taker" because it is too small relative to the overall market to have any influence on price, and it must sell at whatever the prevailing market price is, regardless of how much it produces.
This means the firm faces a perfectly elastic, horizontal demand curve at the market price, and since marginal revenue equals price for every unit sold under a horizontal demand curve, the firm's marginal revenue curve ends up horizontal too.
So option 3 is correct.
This means the firm faces a perfectly elastic, horizontal demand curve at the market price, and since marginal revenue equals price for every unit sold under a horizontal demand curve, the firm's marginal revenue curve ends up horizontal too.
So option 3 is correct.
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